More often than they should, debt collectors contact people after the bankruptcy is over.

I’m Northern Virginia Bankruptcy Lawyer Robert Weed, and I hate it when people do illegal stuff to my customers. When debt collectors pester my clients after bankruptcy, I sue them. That’s why I was glad to see what the Second Circuit decided yesterday in the case of Garfield v Ocwen.

Here’s what they said. If a debt collector bothers you after bankruptcy and a debt discharged by the bankruptcy, you can sue them under the Fair Debt Collection Practices Act. Why is that important? Because the Fair Debt Collection Practices Act gives you the right to sue them for $1000.00 in statutory damages.

Here’s the US District Courthouse in Alexandria, where we’re suing a debt collector under the FDCPA for an after bankruptcy violation.

That right, to sue under the Fair Debt Collection Practices Act, is on top of your right to complain to the bankruptcy judge.

If there’s a violation while the bankruptcy is going on, the bankruptcy court is probably where you want to be. Because the bankruptcy code provides for “punitive damages” for continuation of collection acts while the bankruptcy is still on. (That’s 11 USC 362(k).) That means the judge can slap them as hard as he wants.

(You can read a good example of a judge slapping them hard, in the case of Parker v. Credit Central. Credit Central kept going in court against Marion Parker, even after her bankruptcy was filed. The bankruptcy court awarded Parker $10,000 in punitive damages and $30,000 in legal fees. In December 2015, the 11th Circuit Court of Appeals said the bankrutpcy court was OK to do that. “Because Credit Central committed the type of conduct that the automatic stay was created to prevent, punitive damages were appropriate to serve the dual purposes of punishing Credit Central for its indifference to the law and Parker’s rights and to deter it from committing future similar misconduct.”)

Once the bankruptcy is over, all you can get from the bankruptcy court are actual damages. (For example, if you got garnished, you could get the garnished money back; and if the garnishment caused bounced check fees, you could get those too.) But nothing for your trouble. Nothing to slap their hand, to remind them to respect the law.

Debt collectors understandably don’t like to get $1000.00 slaps on the wrist, under the FDCPA. So they argue that the Bankruptcy Code should be the only law that applies. The Ninth Circuit bought that argument in a decision called Walls v Wells Fargo, back in 2002. Most other courts have ignored it, but this past summer a Federal Judge in Roanoke agreed. Lovegrove v Ocwen.

We’re fighting this issue right now, in the US District Court in Alexandria, VA. We are going after McCabe, Weisberg & Conway for this after bankruptcy letter. On the second page, it says “if you have obtained a bankruptcy discharge, this is not an attempt to collect a debt from you.” But it also says, “THIS IS AN ATTEMPT TO COLLECT A DEBT.” And on the first page it says, “The amount of the debt is $325,547.42.”

We think that violates the FDCPA in two ways. First, it’s a false statement of the “amount or legal status of any debt.” Second, saying that it “not an attempt to collect a debt” and that “THIS IS AN ATTEMPT TO COLLECT A DEBT”–that’s “misleading.” Both of those violate the FDCPA at 15 USC 1692e.

The Judge here will let us know what she’s decided, on January 29, 2016. I’ll keep you posted.

PS

Well, we lost. Judge Brinkema told them that their letter was confusing–it confused her, she said. But she told us that our only complaint was with the Bankruptcy Court. She wasn’t about to bother with it, under the FDCPA.

This issue went to appeal at the Fourth Circuit in a case calledDuBois v Atlas 15-1945. (But the Fourth Circuit ducked it. They ruled against the consumer in a different way, and said they’d take up the issue we’re concerned about another day.) So for now, we are out of luck on this. We have three or four cases, even clearer violations, that are on hold right now.

PPS

In a new decision called Owens v. LVNV, the 7th Circuit said that applying to be paid in a bankruptcy on a debt that’s too old, is NOT an FDCPA violation: because it’s not misleading. (The consumer has a chance to figure it out if they look, apparently.) But any false statement during (and presumably after) the bankruptcy would be an FDCPA violation. Judge Brinkema is clearly out of step when she said that the consumer can only complain to the bankruptcy court. We hope the 4th Circuit will tell her that, soon.

Two years after bankruptcy, Tonya is as home owner.

Tonya M of Stafford Va, filed bankruptcy with me in January 2013. In May 2015, she was approved for a mortgage and bought a house.

Tonya M, of Stafford VA, came to see me in late 2012. Her marriage had broken up, and she was working in a clothing store.

Tonya was desperate. She had just sold her engagement ring to keep herself afloat. Her biggest problem was a $30,000 loan from Navy Federal Credit Union. She was also cosigner on a $7,000 card with USAA. So far, her ex was paying that, but she was afraid he’d stop, then then then they’d come after her.

She had never been a homeowner and never expected to be; she just wanted Navy Fed to leave her alone; and not still be worried about her ex paying the cosigned USAA card.

I told her bankruptcy would do that and more. In three years, I told her, you can be back to good credit.

“In three years you can be back to good credit–good enough credit to get a car loan at 6.9% or maybe lower–good enough credit, if the income is there, to qualify for a mortgage and buy a place.”

Turns out, it didn’t take Tonya even three years to by a house after bankruptcy.

We filed Tonya’s Chapter 7 bankruptcy case in January 2013, and it was discharged April 25, 2013.

In May, 2015, just two years after bankruptcy, Tonya was approved for a mortgage and bought a house.

So many people put off talking to a bankruptcy lawyer. They are afraid if they file bankruptcy, they can never get anything. For most people, that’s exactly backwards. Tonya M would never had been able to buy that house, unless she filed bankruptcy. Filing bankruptcy was what she needed to do, to fix her credit score and get her off the ex’s USAA card.

If you are wondering if you should file bankruptcy, make an appointment with an experienced bankruptcy lawyer. Don’t put it off. Start toward your better future today.

Tonya still asked for my help.

That big Navy Fed debt, the one that got her to come see me, was still sitting on her TransUnion report. Since both Experian and Equifax had it right, she had been able to get her mortgage. But her TU score was lower than the others, and she wanted that fixed.

We got to work right away.

As part of my exclusive Five Year After Bankruptcy Warranty, I’ll fight for you, if discharged debts pop back up on your credit report. No charge to you. If they don’t fix it right away, I sue the creditor and credit bureau–and I send them the bill. We get a couple thousand dollars for our clients, and a couple thousand as legal fees, doing that each month.

When they came to see me in January, Harold and Linda were ten days from foreclosure. Today their mortgage is current and their bad debts are all gone.

Harold had a career change due to medical reasons, lost income, got into credit card debt, had a car repossessed and got behind on the mortgage. He had tried to get a HARP loan mod and had been turned down. (Probably because their debt to income ratio was too high.) This was January 23 and his foreclosure sale was set for February 3.

We filed Chapter 7 bankruptcy on January 29. We stopped the foreclosure and discharged $57,000 in debts. ($30,000 in credit cards and $27,000 repossession.)

On January 23, Harold and Linda were ten days from foreclosure, their house payment was $3215 and they were seven months behind. They filed Chapter 7 bankruptcy, got approved for a loan mod, their payments is $450 less and they are current.

Harold and Linda dropped in to see me last Friday, November 15. With their debt to income ratio better–since the debts were gone–and three more months of paystubs on Harold’s new job, they had been able to get a loan mod. Their interest rate had gone from 7% to 4.25. Their monthly payment is $450 less–and they are current.

This is why I love being a bankruptcy lawyer. I help people be happy and debt free.